Dollar slightly higher before RBA decision

THE Australian dollar is higher in quiet trade as the market awaits the Reserve Bank of Australia's monthly interest rate decision.

At 12pm AEST today, the local unit was trading at 89.31 US cents, up from 89.09 cents yesterday.

During the morning, the currency traded between 89.06 US cents and 89.43 cents.

The RBA is almost certain to cut the cash rate by a quarter of a percentage point to a new record low of 2.5 per cent after low June quarter inflation figures, reported on July 24. The reserve bank will announce its decision at 2.30pm AEST.

"I don't think anyone wants to do too much ahead of the all-important event," Westpac chief currency strategist Robert Rennie said. "For me, it's not so much what they do but what they say."

Mr Rennie said that, in the short statement released with the RBA's decision, he will look for signs the central bank beleives there's scope to further cut the interest rate.

"If I see that kind of signal, then we're not looking at the possibility of two back-to-back monthly interest rate cuts," Mr Rennie said. "I can see a situation where the Aussie dollar does a bit better if that scenario pans out."

Mr Rennie said he expected another cash rate cut towards the end of the year, followed by one in early 2014.

Meanwhile, the Australian bond market was weaker at noon. At 12pm AEST today, the September 10-year bond futures contract was trading at 96.355 (implying a yield of 3.645 per cent), down from 96.390 (3.610 per cent) yesterday. The September three-year bond futures contract was at 97.500 (2.500 per cent), down from 97.530 (2.470 per cent).